Anderson v ANZ Bank New Zealand Limited

[2023] NZHC 2309

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2022-470-55

[2023] NZHC 2309

UNDER

the Insolvency Act 2006

BETWEEN

TRINETTE ANDERSON

Insolvent

AND

ANZ BANK NEW ZEALAND LIMITED ASB BANK LIMITED

FINANCE NOW LIMITED HEARTLAND BANK LIMITED

LATITUDE FINANCIAL SERVICES LIMITED

WESTPAC BANKING CORPORATION

Creditors

Hearing:	On the papers
Appearances:	R Shahram for the Trustee
Judgment:	24 August 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 24 August 2023 at 4.00 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Webster Malcolm law, Warkworth

ANDERSON v ANZ BANK NEW ZEALAND LTD [2023] NZHC 2309 [24 August 2023]

Introduction

[1]    The insolvent, Trinette Anderson, seeks approval of a creditor’s proposal pursuant to part 5 subpart 2 of the Insolvency Act 2006.

[2]    Section 326 of the Insolvency Act provides that to avoid bankruptcy, an insolvent person may make a proposal to creditors for the payment or satisfaction of the insolvent’s debts. The first proposal filed by the insolvent was not notified to the secured creditors of Ms Anderson. An amended proposal was therefore required to be filed to ensure the provisions of the Insolvency Act were complied with.1 An amended proposal was therefore filed together with a further report by the provisional trustee, Christine Liggins, dated 22 February 2023.

[3]    The February 2023 report by the trustee attached copies of postal votes relied on as approving the amended proposal but which referred to the date of the original proposal. I directed that a further trustee’s report was to be filed attaching evidence to allow the court to ascertain whether it would have been clear to the creditors that they were agreeing to the amended proposal despite the error in the postal voting form.

[4]    A further trustee’s report was filed on 30 June 2023 together with a memorandum of counsel from the trustee confirming that the trustee had sought and received confirmation from the creditors that they understood they were voting on the amended proposal. In addition, the memorandum confirmed that no further costs had been incurred by the provisional trustee in preparing the additional reports or the necessary correspondence as these additional steps were not considered to be proper fees or expenses of the trustee.

[5]    Counsel asked for orders to be made on the papers. I issue this judgment making the orders sought for the reasons set out below.

Relevant legal principles

[6]Section 333 of the Insolvency Act provides:

1      Insolvency Act 2006, ss 327 and 330.

333     Court must approve proposal

(1)After the proposal has been accepted by the creditors, the trustee must, as soon as practicable,—

(a)apply to the court for approval of the proposal; and

(b)send notice of the hearing of the application in the prescribed form to the insolvent and to each known creditor.

(2)The court must, before approving a proposal, hear any objection that is made by or on behalf of a creditor.

(3)The court may refuse to approve the proposal if it considers that—

(a)the provisions of this subpart have not been complied with; or

(b)the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors; or

(c)for any reason it is not expedient that the proposal be approved.

(4)The court must not approve a proposal if it does not provide for the payment, before any other debts are paid, of—

(a)those debts that would have priority under this Act if the insolvent was adjudicated bankrupt; and

(b)the trustee’s fees and expenses that are properly incurred by the trustee in respect of the proposal; and

(c)costs incurred by a person other than the insolvent in organising and conducting a meeting of creditors for the purpose of voting on a proposal.

(5)Subsection (4)(a) does not apply to the extent that a creditor waives the priority that the debt of that person would otherwise have had.

(6)When it approves the proposal, the court may correct any formal or accidental error or omission, but must not alter the substance of the proposal.

[7]    As set out in s 333(3)(a), the court may refuse to approve the proposal if it considers that the provisions of subpart 2 of part 5 of the Insolvency Act have not been complied with. I discuss these requirements below.

[8]    Whether the proposal is reasonable (as required by s 333(3)(b)) is to be assessed objectively from the perspective of the “commercially experienced prudent creditor”.2

[9]    In Herbert v New Zealand Guardian Trust Co Ltd the Court of Appeal held that in determining whether a proposal is reasonable, the Court is required to exercise its independent judgment but that it must be influenced by the commercial judgment of creditors.3 The Court held that unless there are special public interest or other commercial considerations present, the assessment of the general body of creditors ought to be accepted.

[10]   The final question for the Court pursuant to s 333(3) is whether there is any reason why it is not expedient that the proposal be approved (s 333(3)(c)). As Asher J explained in Kelly v Structured Finance:4

… The word “expedient” is capable of a broad meaning. It can mean “practicable”, but also has the wider meaning of “suitable” or “appropriate”… I consider that s 333(3)(c) requires an open-ended approach, and that any attempt to focus it on a specific matter would be to impose a limitation that does not arise from the words of the subsection.

Proposal

[11]   The proposal filed by the insolvent is to make payments of $460 per week for four years in respect of the proven debts, on condition that no further action is taken against the insolvent, no defaults are registered, no goods are re-possessed and that the payments are in full settlement of the debt.

[12]   The payments are to be made from the insolvent’s current employment where she had worked for one year at the time the original proposal was filed. Her salary was $62,500 net per annum at the time of the amended proposal.

2      Kelly v Structured Finance [2009] 2 NZLR 785 (HC) at [45]; approved by the Court of Appeal in

Magsons Hardware Ltd t/a Mitre 10 Mega v Bogiatto [2011] NZCA 378 at [29].

3      Herbert v New Zealand Guardian Trust Co Ltd [2012] NZCA 442.

4      Kelly v Structured Finance, above n 2, at [53].

[13]   In the proposal the insolvent further agrees that she will not enter into any further personal borrowing or seek an increase to existing borrowing during the term of the proposal.

[14]   The provisional trustee reports that the total amount now owing to unsecured creditors is $125,225.31 and to secured creditors, $3,500. Under the proposal, the secured creditor will continue to receive the payments to which they are contractually entitled and approximately $95,680, less trustee’s fees and disbursements, will be repaid to the unsecured creditors.

Have the requirements of subpart 2 been complied with (s 333(3)(a))?

[15]   The trustee’s report filed on 30 June 2023 records that a notice was sent to the creditors on 18 November 2022 advising that a new creditors’ meeting would be held on 15 December 2022 including all creditors and secured creditors. The notice enclosed a copy of the amended proposal and postal voting forms.

[16]   As noted above, a typographical error was made in the postal voting form provided as it referred to the proposal dated 24 May 2022 and not the amended proposal dated 15 November 2022.

[17]   On 11 May 2023, the trustee emailed the creditors to advise that the amended postal voting form incorrectly referred to the original proposal dated 24 May 2022. The trustee requested that the creditors confirm by email which proposal they voted for at the creditors’ meeting held 15 December 2022. The trustee attaches copies of the replies from each of the creditors to her 30 June 2023 report. I am satisfied on the basis of these replies that the creditors understood that they were voting on the amended proposal.

[18]   Section 333(6) allows the Court to correct any formal or accidental error or omission that does not alter the substance of the proposal. I rely on this section to correct the error in the postal voting form.

[19]   The meeting of creditors was held on 15 December 2022. No creditors attended in person. Postal votes in favour of the proposal were received from:

(a)ASB Bank Limited ($14,583.72);

(b)Latitude Financial Services Limited ($25,369.83); and

(c)Westpac Banking Corporation ($30,023.51).

[20]   One creditor, ANZ Bank New Zealand Limited ($9,957.58), voted against the amended proposal (as it had done in respect of the original proposal).

[21]   Two further creditors, Heartland Bank Limited and Finance Now Ltd, did not return their postal votes. The trustee’s report attaches confirmation that these two creditors received notice of the new creditors’ meeting and amended proposal.

[22]   Section 331(3) of the Insolvency Act provides that the resolution accepting the proposal must be decided by a majority in number and three-quarters in value of the creditors who vote and who are personally present or represented at the meeting or who have voted by postal vote.

[23]   I am satisfied that the s 331(3) requirement has been complied with. The remaining provisions of subpart 2 also appear to  have been met.  The first stage in   s 333(3) is therefore satisfied.

Is the proposal reasonable (s 333(3)(b))?

[24]The second stage is to consider the reasonableness of the proposal.

[25]   As discussed in the authorities above, it is appropriate to be influenced by the creditors’ positions in relation to the proposals. All but one of the creditors voting have accepted this proposal supporting a decision that it is reasonable.

[26]   Furthermore, the provisional trustee’s report confirms that it is her view that the insolvent’s proposal is an advantageous one for the creditors as the proposal recovers more debt than could be achieved through any alternative method, such as a debt repayment order or bankruptcy. On this basis I accept that the proposal is

reasonable and calculated to benefit the general body of creditors as the section requires.

Is there any reason  that it is  not expedient for the proposal to be approved     (s 333(3)(c))?

[27]   There is nothing in the application before me that suggests that it would not be expedient for the proposal to be approved.

Section 333(4) matters

[28]   The Court’s approval is not prevented by the matters set out in s 333(4) as these have been addressed in the proposal to the extent required.

Result

[29]   For the reasons set out  above,  I  approve  the  amended  proposal  of  Trinette Anderson dated 15 November 2022 (filed on 4 April 2023) pursuant to s 333 of the Insolvency Act.

Associate Judge Sussock